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CIRCULAR No

CIRCULAR No.23/1999/TT-BTC OF FEBRUARY 26, 1999 GUIDING THE ELABORATION AND EXAMINATION OF 1998 FINANCIAL REPORTS OF STATE ENTERPRISES

The Ministry of Finance issued Decision No.1141/TC/QD/CDKT of November 1, 1995 on the enterprise accountancy regime, Circular No.73/TC/TCDN of November 12, 1996, guiding the elaboration, publicity and examination of financial reports and accountancy examination by the State enterprises. In principle, State enterprises shall have to comply with the above-said documents.

To conform to the practical situation, the Ministry of Finance guides the amendments and supplements to a number of points in the financial report elaboration and examination applied in 1998 as follows:

1. Regarding fixed asset depreciation

1.1. Those enterprises which have registered the fixed assets use duration with the agencies managing the State capital and property at enterprises or which have been allowed by the Ministry of Finance to make depreciation beyond the time frame prescribed in Decision No.1062/TC/QD/CSTC of November 14, 1996 of the Ministry of Finance shall comply with the registered or approved levels.

1.2. The fixed assets which have been newly invested or procured in the year and have not yet been registered in term of their use duration with the agencies managing the State capital and property at enterprises, shall be depreciated for 1998 within the use-time frame prescribed in the above-said decision.

1.3. Where enterprises increase or reduce the fixed asset depreciation levels not according to the registered or approved duration in order to create sources for investment loan payment (or for loss reduction), the amortization shall be dealt with as follows:

- The enterprises may make depreciation at a level higher than the registered or approved level in order to repay investment loans, which, however, must not be lower than the minimum use duration within the depreciation bracket and not higher than the deficit amount for investment loan repayment as contracted.

- They shall be entitled to readjust the depreciation level which, however, must not be lower than the maximum use duration within the prescribed depreciation bracket and must not exceed the arising loss amount. This means that the enterprises must not reduce the depreciation level to create quasi profits while being unable to recover the investment capital.

The concerned enterprises shall notify the depreciation increase or reduction to the Department for Management of State Capital and Property at Enterprises as well as the Tax Department for monitoring.

All cases of depreciation increase or reduction beyond the bracket prescribed in Decision No.1062/TC/QD-CSTC must be agreed upon by the Ministry of Finance.

2. Regarding salary and wages

The settlement of salary and wage fund accounted into expenditures shall comply with Decree No.28/CP of March 28, 1997 of the Government; Circular No.13/LDTBXH-TT of April 10, 1997 of the Ministry of Labor, War Invalids and Social Affairs guiding the methods of setting the wage unit prices and managing wages and income in the State enterprises; Joint Circular No.18/1998/TTLT-BLDTBXH-BTC of December 31, 1998 of the Ministry of Labor, War Invalids and Social Affairs and the Ministry of Finance providing handling guidance when enterprises have failed to meet their budget remittance and profit norms; Decision No.1069/1998/QD-LDTBXH of October 14, 1998 of the Ministry of Labor, War Invalids and Social Affairs promulgating the 1998 average wage levels of the State enterprises assigned the wage unit prices.

3. The accounting exchange rate and handling of rate differences

Foreign currency(ies) generated from economic operations shall be converted into Vietnam Dong according to the current regulations.

The handling of the exchange rate differences shall, in principle, comply with the provisions of Circular No.44/TC/TCDN of July 8, 1997 of the Ministry of Finance. Where the whole amount of exchange rate difference resulting from the reassessment of the year-end balance of long-term debts paid in foreign currency(ies) is accounted into 1998 expenditure and loss is caused, the enterprises shall be entitled to carry forward part of exchange rate difference corresponding to the loss amount arising in 1998 to the subsequent year. The handling of exchange rate difference shall be effected after the depreciation reduction is made according to Point 1.3 above. The particular cases shall be handled according to the Ministry of Finance�s written approvals.

4. Profits subject to surtax

Circular No.48/1998/TT-BTC of April 11, 1998 of the Ministry of Finance shall apply.

5. Making and submission of financial reports

The independent State enterprises, the independent cost-accounting member enterprises of corporations and centralized cost-accounting sections of the State Corporations shall make and submit their financial reports to the State bodies according to the provisions of Decision No.1141-TC/QD/CDKT of January 1st, 1995 of the Ministry of Finance.

The State Corporations shall synthesize and submit their entire-corporation financial reports to the following bodies:

- The General Department for Management of State Capital and Property at Enterprises;

- The General Department of Tax;

- The agencies having decided the establishment of enterprises.

For corporations established by decisions of provincial/municipal People�s Committees under the Government�s authorization and the centralized cost-accounting corporations, their annual financial reports shall also be sent to the provincial/municipal Department for Management of State Capital and Property at Enterprises in the localities where the corporations are headquartered for summing up the financial reports according to provinces and cities.

The sum-up reports of the State corporations shall comply with the set form prescribed in Decision No.1141/TC/QD/CDKT, but the number of enterprises having suffered from losses and their total loss amount and the number of profitable enterprises and their total profit amount must be counted separately (without loss-profit offsetting between the two).

The dependent cost-accounting enterprises, when submitting their financial reports to their superiors, shall also send them to the provincial/municipal Department for Management of State Capital and Property at Enterprises and Tax Department in the localities where the enterprises are headquartered.

For enterprises which have had internal auditing organizations, their 1998 financial reports must be certified by such organizations before they are sent to the concerned State management bodies, and the financial publicity must be made according to the current regulations. For enterprises that have no internal auditing organizations, the auditing and certification by auditing organizations are not required. In case of necessity, enterprises may invite independent auditing organizations to audit and certify their financial reports.

Enterprises that have delayed the submission of their financial reports shall be administratively sanctioned according to the provisions at Point b, Clause 3, Article 2 of Decree No.22/CP of April 17,1996 of the Government and Point 1.4, Item II of Circular No.45/TC/TCT of August 1st, 1996 of the Ministry of Finance.

The general directors (directors) and chief accountants of enterprises shall be answerable before the State and law for the accuracy and truthfulness of data in the financial reports of enterprises.

6. Examination of enterprises� financial reports

6.1. Examination of financial reports

The examination of financial reports of enterprises shall comply with Decree No.61/1998/ND-CP of August 15,1998 of the Government on inspection and examination of enterprises and Decision No.1840/1998/QD-BTC of December 15,1998 of the Minister of Finance promulgating the regulation on overcoming the overlapping in enterprise inspection and examination by various inspection and examination bodies of the Ministry of Finance.

Basing themselves on the financial reports made by enterprises, the agencies managing the State capital and property at enterprises shall check the capital preservation and development, business results and debt payment capability of the State enterprises; consider the distribution and use of after-tax profits; the establishment and use of funds at enterprises according to the current regulations.

Depending on enterprises� financial capability and activities, the examination may be made comprehen-sively or partially according to matters for a number of key independent State enterprises.

Upon the completion of examination, a written conclusion on the examined contents must be made. The direct examiner shall have to sign such record and be responsible for the examined data.

For State enterprises meeting with serious financial problems and having no conditions to organize the examination, the agencies managing the State capital and property at enterprises may propose the financial inspectorate to conduct the inspection or request an independent auditing organization to examine the financial reports of the enterprises. The auditing costs shall be accounted into the expenses for management of enterprises. The independent auditing organizations shall take responsibility before law for the audited data.

For public-utility enterprises: The agencies which have decided the establishment of enterprises shall assume the prime responsibility and coordinate with agencies managing State capital and property at enterprises in organizing the examination and ratification of annual financial reports of enterprises as prescribed in Circular No.06/TC/TCDN of February 24, 1997 of the Ministry of Finance guiding the regime of financial management over State enterprises engaged in public-utility activities, and guiding circulars of particular branches.

6.2. Synthesizing and evaluating financial reports of enterprises

Basing themselves on enterprises� financial reports, the agencies managing the State capital and property at enterprises shall have to evaluate, analyze and synthesize the business efficiency; the level of State capital preservation and debt payment capability; the distribution and use of after-tax profits; the establishment and use of funds by all State enterprises.

The provincial/municipal Departments for Management of State Capital and Property at Enterprises shall have to synthesize and evaluate the financial reports of all State enterprises under their management in their respective localities.

The General Department for Management of State Capital and Property at Enterprises shall have to synthesize and evaluate the financial reports according to the economic branches (industry, construction, agriculture and rural development, communication and transport, trade, tourism...) and of State Corporations (Corporations 90, Corporations 91) established by the Prime Minister or ministries.

When making evaluation and synthesis, it is necessary to clearly distinguish:

- The enterprises operating with profits, the total profit amount; the loss-suffering enterprises and their total loss amount (without making loss-profit offsetting between the two). The ratio of profit to State capital (the ownership capital)

- The enterprises which have preserved and developed the capital and the enterprises which have not preserved the capital. The total amount of capital lost through business activities, accumulated losses, property devaluation, bad debts, expenses that cannot be offset by any sources, irrecoverable investment amounts and other loss amounts.

- Debts: tax debts, debts owed to domestic and foreign banks, to investors, customers and the laborers, and other debts. Particularly, the debt repayment capability and causes of non-payment of debts shall be assessed.

The provincial/municipal Departments for Management of State Capital and Property shall make sum-up reports with economic branch-based analysis and send them to the Ministry of Finance (The General Department for Management of State Capital and Property at Enterprises), the provincial/municipal Finance Services as well as People�s Committees. The branch-based evaluation reports shall be sent to concerned provincial/municipal branch-managing Services in the localities before May 31, 1999.

The General Department for Management of State Capital and Property at Enterprises shall make the evaluation reports and synthesize the financial reports of the State enterprises of various economic branches (industry, construction, agriculture and rural development, trade, tourism, communication and transport) and submit them to the branch-managing ministries before June 30, 1999.

The reports on the sum-up evaluation of the financial reports of the State enterprises throughout the country shall be submitted to the Minister of Finance before June 30, 1999.

The provincial/municipal Departments for Management of State Capital and Property at Enterprises shall continue classifying enterprises for 1998 according to Directive No.868/1998/CT/BTC of March 26, 1998 of the Minister of Finance. The enterprises which do business with efficiency must be the enterprises which earn business profits for three or more years in a row.

7. This Circular applies to the elaboration, examination and handling of 1998 financial reports of the State enterprises.

If any problems arise in the course of implementation, the agencies and enterprises are requested to promptly report them to the Ministry of Finance for study and settlement.

For the Minister of Finance

Vice-Minister

TRAN VAN TA